Ong Han Nam v Borneo Ventures Pte Ltd

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD
• Judgment Date: 30 August 2023
• Neutral Citation: [2023] SGHC(A) 30
• Court: High Court Appellate Division (Singapore)
• Docket Number: Civil Appeal No 60 of 2022
• Hearing Date: 09 March 2023
• Citation: [2023] SGHC(A) 30
• Year: 2023
• Plaintiff Counsel: Lem Jit Min Andy, Poon Pui Yee and Cherrilynn Chia (Harry Elias Partnership LLP)
• Subject Matter: Damages,Assessment
• Published date: 05 September 2023

Aedit Abdullah J (delivering the judgment of the court): Introduction

In the hearing leading to the present appeal, the parties were to have their dispute on the quantum of damages determined according to the parameters laid down by the Court of Appeal in its decision in Ong Han Nam v Borneo Ventures Pte Ltd [2021] 1 SLR 1248 (“the CA Judgment”). Unfortunately, that hearing appears to have proceeded on a wrong approach, with parties and the judge below (“the Judge”) misapprehending how the damages were to be measured. The arguments on appeal were also largely formulated by adopting the wrong approach. Nonetheless, there is sufficient material for this Court to give effect to the Court of Appeal’s directions as best as it can.

Background to the dispute

We derive the background facts partly from the Introduction section of the CA Judgment.

The core of the dispute centres on a plot of land of approximately 1.459 acres (“the Subject Land”). It is part of a larger piece of land situated in the Sembulan District, Kota Kinabalu, Sabah, spanning an area of about 95.58 hectares (238.63 acres) with title number 017544875 (“the Sembulan Land”). The leasehold interest in the Sembulan Land is vested in Sutera Harbour Golf and Country Club Sdn Bhd (“SHGCC”). The Subject Land housed a power plant (“the Co-Gen Facility”).

In March 2014, the ownership of the ultimate parent company of SHGCC, Sutera Harbour Group Sdn Bhd (“SH Group”), changed hands with 77.5% of the shareholding in SH Group being acquired by the Respondent, Borneo Ventures Pte Ltd, from the Appellant, Mr Ong Han Nam, otherwise known as Edward Ong (“the Appellant”) pursuant to a Subscription Agreement dated 30 December 2013 (“the SA”). The acquisition was completed on 26 March 2014.

In the SA, the Appellant had given the following warranties to the Respondent: that SHGCC was the sole legal and beneficial owner of the Sembulan Land which included the Subject Land (“the Land Warranty”); that the assets held by the SH Group at the time would not be disposed of except in the ordinary course of business (“the Asset Disposal Warranty”); any transactions involving disposal of the SH Group’s assets would be conducted at arm’s length (“the Arm’s Length Warranty”).

However, on 12 July 2013, ownership of the plant and machinery of the Co-Gen facility on the Subject Land was transferred by a tenant of the Subject Land to one of the Appellant’s companies, Omega Brilliance Sdn Bhd (“OBSB”) in exchange for OBSB paying off certain debts. Subsequently, pursuant to a sale and purchase agreement dated 1 March 2014, SHGCC sold the Subject Land to OBSB for Malaysian Ringgit (RM) 1,000. The date of 1 March 2014 appears to have been inserted in that agreement pursuant to an email from one Ms Wong Lee Ken (“Ms Wong”) dated 20 March 2014 to one Timothy Soo from a firm of solicitors practising in Kota Kinabalu, Sabah, Malaysia. However, nothing turns on this backdating and we will say more about Ms Wong later. Both the Subject Land and assets of the Co-Gen Facility were consolidated under OBSB’s ownership: see CA Judgment at [7].

The Appellant acknowledged that the existence of this sale and purchase agreement was never disclosed to the Respondent.

The Respondent sued the Appellant for breach of the three warranties. The Judge allowed the Respondent’s claim: Borneo Ventures Pte Ltd v Ong Han Nam [2020] SGHC 91. On appeal, however, the Court of Appeal found that the Appellant was liable for breach of only the Land Warranty under the SA, specifically, that the Appellant had warranted that SHGCC was the sole legal and beneficial owner of the Sembulan Land when this was not so because the Subject Land, which was supposed to be part of the Sembulan Land, had been sold in the earlier agreement involving OBSB and was no longer part of the Sembulan Land.

The Court of Appeal found that damages would be an adequate remedy for the Appellant’s breach of the Land Warranty and reversed an injunction which the Judge had granted restraining the Appellant from transferring the land to OBSB. In particular, on the issue of damages, the Court of Appeal held (CA Judgment at [81]):

In our view, the appropriate amount of damages should be based on the fair market value of the Subject Land at the time of purchase, with interest. This would have been the amount that would have been deducted from the acquisition price if GSH had been properly apprised of the fact that the Subject Land was not part of the deal. The award of damages should also have regard to any tax liability incurred by SHGCC on account of the S&P, and any tax penalties that SHGCC would be required to pay due to the S&P. Based on the figure so arrived at, Ong should only pay to Borneo Ventures 77.5% of the same, as under the SA, Borneo Ventures only acquired 77.5% of the shares of SH Group and the remaining still belong to Ong.

[emphasis added]

This was the basis on which the assessment of damages was to be conducted. Any issue of tax liability was not considered because parties had reached a common landing on this issue and formalised it in a consent order.

Four witnesses gave evidence at the assessment of damages hearing. The Respondent’s witnesses were Mr Gilbert Ee, CEO of GSH Corporation, which was the ultimate holding company of the Respondent, and an expert witness: Mr Wong Chaw Kok (“Wong”), a chartered surveyor and valuer. The Appellant testified and he had an expert witness, Ms Yen Sie Fui who was also a chartered surveyor and valuer.

In assessing damages, the Judge considered two issues: What was the correct date to assess the damages due to the Respondent? What was the fair market value of the Subject Land as at the date of assessment?

The Judge also had to determine a preliminary point on the admissibility of documents. The Respondent sought to admit documents, including a rebuttal report by Wong, in its supplemental bundle of documents (“the PSB”). The Appellant objected, arguing that because these documents were not part of the agreed documents, the Respondent had to satisfy ss 66 and 67 of the Evidence Act (Cap 97, 1997 Rev Ed) before these documents could be admitted into evidence. Because the PSB documents were not formally proven, the Appellant urged the Judge to exclude them, pursuant to the inherent powers of the court under O 92 r 4 of the Rules of Court (2014 Rev Ed).

These objections carried no weight with the Judge. It is unnecessary to elaborate on her reasons because ultimately the PSB documents were not material to this Court as we elaborate later.

Date for assessing damages due to the Respondent

The Judge held that damages due to the Respondent should be assessed at the completion date of the SA: 26 March 2014. The Appellant had impliedly accepted this date as he had instructed his expert to carry out the valuation as at 26 March 2014 (Borneo Ventures Pte Ltd v Ong Han Nam [2022] SGHC 162 (“the Judgment”) at [161]). The Appellant did not dispute that this was the appropriate date for assessing damages in his closing or reply submissions.

Fair market value of the Subject Land as at 26 March 2014

The main dispute between the parties was whether the Subject Land was to be valued based on its then existing use as “Industrial use (Co-Gen) Plant” or on its potential future “Mixed Use”. The Appellant said it was the former while the Respondent said it was the latter. In particular, the Respondent’s case was that what it was prepared to accept as a valuation of any particular asset for the acquisition of shares under the SA was different from the value that it would ascribe to that same asset if it were to voluntarily dispose of it under normal circumstances.¹ Once the correct use was determined, the next step would be to determine the value of the Subject Land based on that use.

The Judge was of the view that the Subject Land should be valued for “Mixed Use” as at 26 March 2014 because, on that day, its zoning for “Industrial us (Co-Gen Plant)” was academic. The plant was either defunct or on “standby” and, up to the date of the Judgment, had not resumed operations (Judgment at [162]).

Second, even if the assets of the target company or companies were acquired on an “as is where is” basis as contended by the Appellant, any land that was part of the acquisition had potential that came from a change of use. The SA was an investment and the investment included redevelopment potential (Judgment at [165]).

Based on the evidence before her, the Judge’s final valuation of the Subject Land was RM 33.7 million, and the Respondent was entitled to 77.5% of this amount which came up to RM 26,117,500.00. This was because the Respondent had acquired only 77.5% of the shares in the company which owned the Sembulan Land. The Judge also awarded the Respondent interest on this sum at the rate of 5.33% per annum from 26 March 2014 until payment (Judgment at [177]).

Our Decision in Respect of the Appeal The issues

The primary issue was the valuation of the Subject Land. However, the approach taken below was at odds with the directions of the Court of Appeal. The parties’ focus was on the first portion of the Court of Appeal’s holding at [81] of the CA Judgment. In doing so, the parties overlooked the second sentence in [81] of the CA Judgment. We repeat both sentences below:

In our view, the appropriate amount of damages should be based on the fair market value of the Subject Land at the time of purchase, with interest. This would have been the amount that would have been deducted from the acquisition price if GSH had been properly apprised of the fact that the Subject Land was not part of the deal.

The parties and the experts had proceeded on the basis that the Subject Land was to be valued in isolation. There was no regard to the value of the Sembulan Land which the parties had used in order to determine the acquisition price of the...